Labour leader Ed Miliband offered to include trade unions in a £5,000 cap on donations as he threw down a gauntlet on party funding reform.
He said the change would rule out “some millions of pounds” every year of the cash from the movement which is by far the party's biggest source of income.
The application of a cap to trade unions has been one of the sticking points in previous negotiations over reform - restarted in recent weeks at the height of the cash-for-access controversy.
Mr Miliband said the change would be “painful” for Labour but challenged the other main party leaders to offer compromises in a bid to find a way forward.
He made clear however that he was not prepared to sever the flow of cash from individual trade union members through an annual political levy.
There could be greater transparency over where that money went he said, though he indicated that he did not favour changing the system so that members had to opt in to donating rather than opt out.
“All political leaders are going to have to make difficult decisions on this. When I talk about a £5,000 donation cap it has got to apply to donations from the trade unions,” he told BBC1's Andrew Marr Show.
“The large donations from trade unions would no longer happen under this system. It does need to be a comprehensive reform - I am not making a unilateral act.”
He went on: “Let's take the big money out of politics. I hope Nick Clegg and David Cameron will come forward with their own proposals that say: 'We're willing to take a bit of pain too; we are willing to make changes which will make things harder for our political party but it's in the interests of our democracy'.”
“Let's make a concerted effort now to really grasp that nettle. I don't know how quickly we can get that reform. It's taken a long time to get to this stage, let's try and get the reforms moving.”
Mr Miliband said he accepted that the reduction in funding could not be plugged by any increase in taxpayer funding in the current economic climate.
And he suggested that limits on party spending should be set “substantially lower” in a bid to reduce the need for parties to seek huge sums from wealthy donors.
“In the current economic circumstances I don't think (state funding) is practical but what I think needs to be done in the negotiations is to look at the existing money spent on politics,” he said.
A 15-month inquiry last year proposed a £10,000 cap on donations in a bid to end “cash for influence” scandals and corruption allegations - partly paid for by a £23 million-a-year taxpayer subsidy.
Mr Miliband said a £50,000 limit proposed by the Prime Minister was too high.
Representatives of the three main parties at Westminster sat down for face-to-face talks last week in the latest bid to kick-start the reform process.
Pressure for change has been heightened by the resignation of a senior Tory fundraiser after he was secretly filmed by undercover reporters from The Sunday Times boasting that he could provide access to Mr Cameron and other ministers and influence over policy for “premier league” donors giving £250,000 to the party.
Mr Miliband will hope his move will help counter accusations that he is under too much influence from union leaders.
One union welcomed the announcement.
“Unite supports Ed Miliband's efforts to restore faith in politics, and is pleased that the vital link between Labour and millions of working people is valued and will be retained”, a spokesman said.
“The affiliation to the party is the most transparent money in politics. Now more than ever, it is something to be proud of.”
The Tories played down the significance of the offer - suggesting the cap would have applied only to a tiny proportion of the money received by Labour from the unions.
Additional donations beyond the affiliation fees amounted to just £100,000 last year, the party said, compared with a total of just over £10 million altogether.
Co-Chairman Baroness Warsi said: “The Conservative Party has long argued that we need to take big money out of politics, that's why we proposed a cap that would apply equally to individuals, businesses and trade unions.
“But Ed Miliband wants an exemption for the union paymasters who got him elected. His so-called cap would hit just 1% of Labour's trade union donations.
“In a week when Unite threatened to bring the country to a halt he wants to make Labour more dependent on union funding and keep it that way.
“Unless Ed Miliband supports a universal cap on donations people will see these as weasel words from a weak leader.”
But Labour described that as “absolute nonsense” and said that overall it would affect around 50% of donations.
Setting out the bold initiative on his website, Mr Miliband wrote that it was “only fair that a cap we want to impose on companies and individuals should also cover donations from trade unions”.
Defending the levy of individual members, he said: “There is the world of difference between a wealthy individual giving millions, and millions of trade union levy payers paying a small sum of money to affiliate to the Labour Party.
“At a time when too much of politics is out of touch with the vast majority, I am proud that all these working people have a role in the Labour Party. I am proud of our link to the unions. It is part of what makes Labour rooted in our communities and I am determined it will remain so.”
In a direct challenge to the other parties, he went on: “At a time when politics is seen as being disconnected from most people's lives, the public need to know that their elected leaders are not just listening to those who can pay.
“So I believe it is time now for real change: it is time to take the big money out of politics.
“We have now begun a new round of cross-party talks on this issue and I am determined that this opportunity to bring about that change is not wasted.
“It is essential that we build lasting change once again. We should proceed in such a way that any change does not significantly disadvantage one party over another.
“It should be done by consensus and of course in the meantime parties will still need to be funded, including through donations of more than £5,000.
“But change must and will come.
“It is in the interests of our democracy and our country to bring about change. I call on David Cameron and Nick Clegg to show the same determination to change our politics.”
He attacked the Tories' proposal of a £50,000 limit.
“David Cameron has said he does not regard any donation of less than £50,000 as 'significant'. But how many people could even consider giving such a sum in one year to a political party?
“A cap set at £50,000 would be unacceptable because it would still keep big money in politics and still leave parties open to questions about buying access.”
Capping donations needed to be accompanied by stricter limits on spending to prevent an “arms race” to secure ever-more money, he suggested - arguing that should be easier to apply now parliamentary terms were fixed at five years.
“It is the capacity to spend money which drives parties to raise it,” he wrote.
The biggest spenders at the 2010 general election were the Tories who used £16.7 million - more than twice Labour's spend but still short of the limit of around £19 million.
Ruling out plugging the gap with increased state funding for at least three years, he said: “I do not believe that is realistic in the current economic circumstances and no-one is suggesting such a course be taken during the lifetime of this parliament.
“If this does need to be addressed in the longer term, let us first use the negotiations to look elsewhere and see whether other changes can address the issues thrown up by reform of party political funding.